Fundraising Commandments

As a pre-seed & seed investor, I see hundreds of pitches every year. I’m also constantly working with a handful of companies looking to raise their Series A/B/C rounds. What follows below are the core tenets of how to avoid some all too common mistakes. In fact, I feel strongly enough about this that whenever I complete a new investment, one of the first things I do is to find time with the founders to walk through this list. The next raise is always just around the corner. Best to prepare now.

1. Do not innovate with fundraising. The opportunity for investors should be evident in the company and product you are building. That should be enough to get investors excited. There is enough existential risk in the funding and formation of any new company without introducing novel structures or fundraising strategies.
2. Never negotiate before you have a term sheet. Be disciplined. Set the hook and wait until commitment bias has had a chance to kick in. It will work in your favor. Investors hate to lose out — especially after their partners have told them to go win an investment — but they can’t fear losing if they’ve already decided not to play.
3. Never tell a prospective investor your price expectations. At best, doing this will set a ceiling on your valuation. At worst, an expectation which is too high will scare investors away before they make an offer. If asked, the best answer is “we’re expecting something in a normative valuation range.”
4. If you are a CEO, no matter how much you may feel it, avoid telling a prospective investor that you are “looking forward to getting things done so you can get back to product.” Investors know that but as CEO, your two primary responsibilities are to get cash in the bank, and to get the right people in the seats. When I hear founders talk about “getting back to product,” it’s hard not to think that long-term they are a product manager, rather than a CEO.
5. The deck matters. Polish matters. Practice matters.
6. Do not schedule any meetings unless you are ready for a full partner meeting. See #5.